Price Elasticity and Cross Price Elasticity

Price Elasticity

• Concept of price elasticity refers to the responsiveness of quantity demanded to changes in price.
• Focuses on the relationship between the change in price of one good and the quantity demanded of another good.

Cross Price Elasticity

• Measures how the price change of one good (e.g., Pepsi) affects the quantity demanded of another good (e.g., Coca Cola).
• Important for understanding market dynamics and relationships between substitute goods.